I believe all currencies and crosses are constantly being speculated day-in and day-out. So I wouldn't be surprised or worry too much about Bitcoin being speculated. As long as the market has liquidity and healthy supply/demand it shouldn't be of a problem.
About our point about bitcoin not having any inherent value, isn't energy exerted to mine those coins costs involved? Hence if people begin to mine more for bitcoins then the cost of energy will go up as difficulty of mining goes up as well. This is the same concept to your cloud storage example. I disagree the mining part has nothing to do with bitcoin prices. Its like saying supply and demand does not affect a price of a goods being sold. In your example of falling price on Bitcoin (or any other currency) would probably be contributed to liquidity issue. If no one wants something or all the buyers are not making the bid doesn't matter what kind of scheme you use the price will fall and will fall hard. This goes for everything in this world. Tulip, Gold, Silver, Copper, etc. But when the price fall doesn't mean the product itself lacks value. Last I remembered I still had to pay for that basket of tulips I sent for mothers day. -Joe ________________________________ From: David Vorick <[email protected]> To: coderman <[email protected]> Cc: "[email protected]" <[email protected]> Sent: Tuesday, November 26, 2013 10:12 AM Subject: Re: bitcoin as a global medium of exchange (was Re: Interesting take on Sanjuro's Assassination Market) As I was telling Jayvan, the idea would be that early adopters use the currency for its inherent uses to them, as opposed to its speculative potential. Right now, bitcoin is almost exclusively speculative. It's worth a lot of money because the value has been increasing consistently. That's tulipmania. In a perfect world you would have some way to protect a currency against speculation. The volatility in bitcoin makes it less useful as a currency, therefore the speculation is damaging bitcoin. I don't have a solution, and I'm not suggesting one, I'm merely suggesting that a solution might exist that would be a substantial improvement. If bitcoin was based on something that had inherent value, say cloud storage, then a spike in value would be followed by a spike in the amount of storage being contributed to the network (bitcoin currently does this, a spike in price is followed by a spike in mining). The key here though is that the network would be protect from dramatic dips in value. When bitcoin drops in price, all of the abundant mining does nothing to save bitcoin, because the bitcoin mining doesn't actually add any value to the network. Nobody cares how many petaflops the network is pulling, because the petaflops can't be put to use somewhere else. But if the mining was based on cloud storage, a dramatic drop in the price of the currency would result in a dramatic drop in the cost of storing data on the network. That's something that actually has use, and so people would let the price fall unreasonably low (instead they would find a way to make use of the cheap storage). This would allow the currency to ride arbitrary spikes in price while being protected against arbitrary drops in price. Jim, the amount of mining being done on the bitcoin network has no impact on the price. The price might have an impact on the volume of mining, but because the mining is specific to the bitcoin network (double sha2 hashing or something like that) it can't be sold or used for other applications. Bitcoin mining is only good for bitcoin mining, which means the demand for the mining is exclusively based on value of the bitcoins being mined every day. On Mon, Nov 25, 2013 at 8:54 PM, coderman <[email protected]> wrote: On Mon, Nov 25, 2013 at 5:43 PM, David Vorick <[email protected]> wrote: >> ... How do you prevent the early adopters from becoming stupid > >> wealthy if the currency takes off? > >high risk, high reward. > >why should early adoption with high risk not pay more than late >adoption with significantly less risk? > > >i agree that the externals affecting BTC exchange rate are volatile >and annoying, but this hardly seems like bitcoin's fault. do you >fight tulpenmanie with currency controls? good luck! >
